The developed world is accustomed to firing employees when times are hard. But the concept is new for many of the world’s emerging economies. In many cases, the legality and process of how a lay-off even happens is vague. Consider the situation that workers in China and Dubai, United Arab Emirates, are currently facing.
China established a the first workplace-protection legislation, known as the Labor Contract Law, last January, which sought to tighten job security and guarantee severance payments. Recent job-discrimination laws also made it easier to file complaints against employers.
But as the global financial crisis hits the heart of the world’s factory floor, worker protections are put on the back burner in an attempt to stop the job loss hemorrhage. Local authorities are permitted to freeze minimum-wage levels, reduce or suspend employer social-insurance contributions. This threatens the public trust in the still-developing rule of law, and the ability of government. Yet these are the types of dodgy practices emerging:
After their factory closed last month, workers from the Shatangbu Yifa Rubber & Hardware Factory in Shenzhen filed for the back pay and severance promised under a contract required by the new law. The Hong Kong-based owner disappeared, according to Shenzhen officials. That left many migrant workers stranded without enough money to return to their hometowns hundreds of miles away. About a third of the factory’s 300 workers went to the Shenzhen government to request a speedy resolution of their case… Local officials later gave the employees 500 yuan ($73) in back pay from a special fund, but said other claims would have to go through a bankruptcy court.
The UAE is experiencing its first mass job losses across the board for the first time ever, and such a situation was not envisioned to happen anytime soon be legislators. Essentially no new labor laws have been established in a decade, and the concept of redundancy does not exist in statute. Interpretation is varied, no compensation payments are clearly required in such an event, and by law, prior written notice is sufficient to lay off employees.
That being said, there are certain minimum statutory entitlements — all accrued benefits (such as accrued but unutilised leave) and so-called termination “gratuity” must be paid, and in the event of foreign employees — a major issue in Dubai, where 80% of the population is foreign — paying for repatriation is also an obligation. However, employers that refuse to pay for accrued benefits and gratuity have a wide leeway to escape prosecution.
The authorities are starting to look at managing redundancy compensation to address a lack of legislation, but at very least, according to one local lawyer:
employers in the UAE were ill prepared to deal with the effects of the volatile world economy and have had little option but to let their employees go, and this will undoubtedly continue into 2009.